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willyhoops
2008-03-19, 07:59
www.ft.com, March 19 2008

Apple in talks with music companies

Apple is in discussions with the big music companies about a radical new business model that would give customers free access to its entire iTunes music library in exchange for paying a premium for its iPod and iPhone devices.

The “all you can eat” model, a replica of Nokia’s “comes with music” deal with Universal Music last December, could provide the struggling recorded music industry with a much-needed fillip, and drive demand for a new generation of Apple’s hardware.

Apple would not comment on the plan, but executives familiar with the negotiations said they hinged on a dispute over the price the computer maker would be willing to pay for access to the labels’ libraries.

Nokia is understood to be offering almost $80 per handset to music industry partners, to be divided according to their share of the market. However, Apple has so far offered only about $20 per device, two executives said. “It’s who blinks first, and whether or not anyone does blink,” one executive said.

Detailed market research has shown strong appetite among consumers for deals bundling music in with the cost of the device, or in exchange for a monthly subscription, executives said.

One executive said the research had shown that consumers would pay a premium of up to $100 for unlimited access to music for the lifetime of the device, or a monthly fee of $7-$8 for a subscription model.

Apple, which is thought to make relatively little money from the iTunes store compared with its hardware sales, is also understood to be examining a subscription model.

Subscriptions would work only for its iPhone devices, where it has a monthly billing relationship with customers through the mobile phone operators offering the device, while the “comes with music” model would work with iPhones and with iPods.

The subscription models under discussion in the music industry include the provision for customers to keep up to 40 or 50 tracks a year, which they would retain even if they changed their device or their subscription lapses.

Other music groups are understood to be in talks with Nokia, which is keen to sign up as many of the major labels as possible before launching its first “comes with music” devices in the second half of this year.


At last the days of CD scanning are all over. It will be a great day for consumers but the impact on Apple is pretty amazing as well:

As well as killing off amazon.com music sales and making sure they control content as well as hardware, apple can extract the best possible deal from the record companies due to their larger market share and kill off competition. In addition they can drive sales of higher capacity iPods. Combined with their possible domination of TV this company is looking like a monster!

Siduhe
2008-03-19, 08:05
It will be a great day for consumers but the impact on Apple is pretty amazing as well

Not sure if that part is tongue in cheek - but there's an alternative view here:

http://www.theregister.co.uk/2008/03/19/apple_itunes_unlimited/

I haven't seen any report which clarifies whether Apple is planning to maintain DRM as part of this new model or not. If so, that would start to look a lot more susceptible to challenge under antitrust rules.

willyhoops
2008-03-19, 08:09
Of course it will have DRM - you can't let someone downlaod all the music and then give their friends a copy! Will be interesting to see if they adopt a new harware DRM to make it tighter.

The french ruling that consumers should be able to covert purchased music between formats is not going to apply to this. Indded, it's of course one of the reasons for the move.

MuckleEck
2008-03-19, 13:26
At last the days of CD scanning are all over. It will be a great day for consumers but the impact on Apple is pretty amazing as well.

I for one will be sad when CDs dissapear if they ever do, I don't want to be limited to some crappy lossy mp3 file download service with DRM and hardware locking.....very sad day indeed if this is the case

aubuti
2008-03-19, 14:35
At last the days of CD scanning are all over. It will be a great day for consumers but the impact on Apple is pretty amazing as well:

As well as killing off amazon.com music sales and making sure they control content as well as hardware, apple can extract the best possible deal from the record companies due to their larger market share and kill off competition. In addition they can drive sales of higher capacity iPods. Combined with their possible domination of TV this company is looking like a monster!
Likely DRM and lossy tracks are big issues, but more fundamentally: When was the last time it was "a great day for consumers" when a "monster" corporation "kill[ed] off the competition"??

snarlydwarf
2008-03-19, 19:02
At last the days of CD scanning are all over. It will be a great day for consumers ...

How would it be good for consumers?

Why on earth would I buy music I can't listen to?

Zaragon
2008-03-20, 03:17
At last the days of CD scanning are all over. It will be a great day for consumers...

Can't see it myself. Certainly won't be a good day for me and I'm a consumer. If I lost the device seems like I'd have to pay for the music all over again. Its like having a CD collection and only one player it works on. If you want another CD on at the same time you have to go buy a brand new collection and another player.

I'd much rather buy the CD and rip, or rather buy a FLAC/WAV download than such a service. In fact I'm not convinced this 'all you can eat' is a good idea for the music industry.

Their income becomes linked to handset sales which is effectively a fixed rate. To make more profit the only variable they can play with is what it costs them to produce the tracks. Seems like more covers and less original music. Quality also doesn't matter quite so much. In fact there doesn't seem much incentive at all.

Actually I can't see an economic model there at all it isn't as if a 'hot' new artist is going to sell more handsets which is the only way they'd increase revenue.

I think paid for tracks will be around for a long time. (Though I'm sure they would lock them to the individual player so you have to buy them multiple times if they could.)

smc2911
2008-03-20, 03:33
Apple won't be the only ones. After all, it's exactly what Rhapsody are doing today. Although I have a large-ish CD collection, and have a slightly fetishistic view of them, I do think that full catalog subscription is the way of the future. Although, as others have said before me, some people are going to have to die first! (In the sense that the older generation, like me, may not embrace it, but the younger generations will think it's normal and will be unable to understand our obsession with the physical artefact).

amcluesent
2008-03-20, 04:12
Looks like there will be two markets; firstly for pop/rock, they'll be a 'all you can eat' but with the real earnings coming from merchandising etc. For classical, the downloads will move to hi-rez (24/96) and retain the per-download pricing.

CardinalFang
2008-03-20, 04:27
(In the sense that the older generation, like me, may not embrace it, but the younger generations will think it's normal and will be unable to understand our obsession with the physical artefact).

My take on it is that when record companies killed off singles to try to force kids to buy the more profitable CD albums instead, Apple and others stepped in with downloads, and now as that generation grows up all they want to do is buy all their media that way.

It's transient to them, not something to own. They want the instant fix from getting the music then and there, not from taking the trip to the record store to spend time flicking through album covers. In a way it's more pure, it's all about the music, not the packaging.

On top of that, many artists now make more money from touring, not CD sales, so something that makes it even cheaper to distribute will catch on fast.

My kids use iTunes to download music and have never hankered after CDs. They don't have elaborate HiFi systems after all, but instead have iPods. We have a generation growing up who have never bought CDs and never will.

moley6knipe
2008-03-20, 04:43
Tis true. People like us with SB3s and Transporters who care about good sound quality are in the minority, I guess

And (leaving aside debates like sound quality, DRM etc) it's much easier/quicker to click "Buy" in iTunes than it is to rip a CD. IMHO, YMMV etc.

And one day I'll be the same; if ITMS offers DRM free Apple Lossless files in the future (and I've no idea if they ever will) then that's how I'll buy my music.